Individual Development Accounts (IDAs) are matched savings accounts that help people with modest means to save towards the purchase of a lifelong asset, such as a home. In this way, they are an "asset-building" program that helps low-income families to save towards a targeted amount of money in order to achieve goals like homeownership, post-secondary education, and/or start a small business. In IDAs, an institution supplements the savings of low-income households with matching funds drawn from a variety of private and public sources.
Usually, for example, when a low income individual saves up to $1,000, they are matched at a 3:1 rate (though that rate can be different depending on the target income brackets) if they had an IDA. Therefore, when a low-income individual saves $1,000, they get matched with $3,000 to use towards the purchase of an asset goal. Participants are usually enrolled in a program for a period of one to five years, and saved earnings, when withdrawn for eligible uses, are matched at rates that can range from 1:1 (the most common) to as high as 6 matched dollars for every dollar saved. IDAs were first proposed by sociologist Michael Sherraden in his 1991 book Assets and the Poor: A New American Welfare Policy.
Homeownership has been a primary means for low-income Americans to build wealth and has been shown to yield positive social outcomes. Evidence suggests that IDAs, when paired with housing counseling, may promote more sustainable low-income homeownership and better financial literary practices for low-income families. Some programs also allow participants to use matched savings for retirement, home repairs, or work-related car or computer purchases. In addition to matching savings, IDA programs provide general financial counseling, and additional training.
HUD's Office of Policy Development and Research | Individual Development Accounts: a Vehicle for Low-Income Asset Building and Homeownership
Brookings | Individual Development Accounts: Policies to Build Savings and Assets for the Poor
Federal Deposit Insurance Corporation | Individual Development Accounts and Banks: A Solid "Match"